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Australian Government Solicitor
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Legal Briefing

Number 36

30 August 1997

THE COMMONWEALTH'S IMPLIED CONSTITUTIONAL IMMUNITY FROM STATE LAW

On 12 August 1997 the High Court handed down its decision in Re The Residential Tenancies Tribunal of New South Wales and Henderson; Ex parte Defence Housing Authority ('Henderson') (No. S75 of 1996). The decision has important implications for activities conducted in the States by the Commonwealth and its agents. This briefing summarises the issues raised in the case, but focuses on the matter of principal significance, the Commonwealth's implied constitutional immunity from State law.

The Facts

Mr Henderson was the owner of a house which was leased by the Defence Housing Authority ('the DHA') pursuant to its statutory functions under the Defence Housing Authority Act 1987 ('the DHA Act') to provide accommodation for defence personnel. Various disputes arose between Mr Henderson and the DHA concerning the application of the Residential Tenancies Act 1987 (NSW) ('the NSW Act') to the lease.

Landlord's Rights of Access

The NSW Act provided that it was a term of every residential tenancy agreement that the landlord may enter the residential premises to inspect them, on not more than four occasions in any period of 12 months, if the tenant has been given not less than 7 days' notice on each occasion. The NSW Act provided that on the application by a landlord under a residential tenancy agreement, the NSW Residential Tenancies Tribunal ('the NSW Tribunal'), which is established by the NSW Act, may 'make an order authorising the landlord or any other person to enter the residential premises'.

It was a further term of every residential tenancy agreement that a copy of the key required to open a lock which has been altered shall be given to the other party, except where the other party consents to not being given a copy of the key or the NSW Tribunal authorises a copy not to be given. On the application by a landlord under a residential tenancy agreement, the NSW Tribunal was empowered, if it was satisfied that it was reasonable in the circumstances to do so, to make an order requiring a copy of the key to be given to the landlord.

Mr and Mrs Henderson sought orders from the NSW Tribunal requiring the DHA to allow the owner to enter the premises for the purpose of inspection and give the owner a key to the premises.

Response by DHA

In response the DHA maintained that it was not bound by the NSW Act. In the proceedings before the High Court, the DHA sought writs of prohibition restraining the Hendersons and the NSW Tribunal from proceeding further with the matters before the Tribunal. The DHA relied on the following grounds:

  • The NSW Act, in so far as it purported to apply to the DHA, was inconsistent with the DHA Act and was therefore invalid under s.109 of the Constitution.
  • The NSW Act, in so far as it purported to apply to the DHA, was invalid because it deals with matters within the exclusive power of the Commonwealth Parliament under s.52(ii) of the Constitution - specifically the power with respect to matters relating to the former State departments of 'naval and military defence', control of which passed to the Commonwealth under s.69 of the Constitution.
  • The NSW Act cannot apply to the DHA because of the constitutional immunity which the Commonwealth enjoys from State laws.
  • Section 64 of the Judiciary Act 1903 did not operate to subject the DHA to the orders sought under the NSW Act.
The Decision

By a 6:1 majority (Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ; Kirby J dissenting) the Court held that the DHA is subject to the NSW Act.

Inconsistency

The Court (Kirby J dissenting) rejected the DHA's contention that the NSW Act, in its purported application to leases between the DHA and private lessors, was inconsistent with the DHA Act for the purposes of s.109 of the Constitution. There were no provisions in that Act which showed an intention to exclude the application of State tenancy laws.

Section 52(ii) of the Constitution

The Court (Kirby J dissenting) rejected the argument that the Commonwealth Parliament's exclusive powers under s.52(ii) of the Constitution precluded the NSW Act from applying to the DHA. That provision confers an exclusive power on the Commonwealth Parliament to make laws with respect to matters relating to departments of the public service transferred to the Commonwealth by the Constitution. The majority held that the intention underlying s.52(ii) was confined to ensuring that State laws did not follow the persons or property of a department of the State public service which was transferred by the Constitution into the Commonwealth public service. On this view, the force of s.52(ii) is largely spent.

Commonwealth Immunity from State Law

By a 6:1 majority (McHugh J dissenting) the Court rejected the broad proposition that the Commonwealth cannot be bound by State legislation. However, by a 6:1 majority (Kirby J dissenting) it also rejected the argument that the Commonwealth's constitutional immunity from State law is no greater than the immunity which the States enjoy from Commonwealth law.

Section 64 of the Judiciary Act 1903

Because of their conclusion that the NSW Act applied to the DHA, it was unnecessary for Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ to determine whether s.64 operated, although Dawson, Toohey and Gaudron JJ doubted that the proceedings in the NSW Tribunal constituted a suit for the purposes of s.64. For similar reasons, McHugh and Gummow JJ held that s.64 was inapplicable. Kirby J also held that s.64 was inapplicable. Section 64 provides that in any 'suit' to which the Commonwealth or a State is a party, the rights of parties shall as nearly as possible be the same as in a suit between subject and subject. It should be noted that the effect of s.64, as interpreted in Commonwealth v Evans Deakin Industries (1986) 161 CLR 254, is that a wide range of State laws may apply to the Commonwealth.

Commonwealth Immunity

'Executive Capacities of the Crown'

In defining the scope of Commonwealth immunity, Dawson, Toohey and Gaudron JJ (in a joint judgment) drew a distinction between 'the capacities of the Crown on the one hand, by which we mean its rights, powers, privileges and immunities, and the exercise of those capacities on the other' (p.18). Section 61 of the Constitution is the source of the rights, powers, privileges and immunities of the Crown in right of the Commonwealth. Dawson, Toohey and Gaudron JJ stated that the purpose in drawing this distinction 'is to draw a further distinction between legislation which purports to modify the nature of the executive power vested in the Crown - its capacities - and legislation which assumes those capacities and merely seeks to regulate activities in which the Crown may choose to engage in the exercise of those capacities' (p.19).

In a separate judgment, Brennan CJ drew a similar distinction between 'the capacities and functions of the Crown in right of the Commonwealth and the transactions in which that Crown may choose to engage in exercise of its capacities and functions' and added: '[b]y "capacities and functions" I mean the rights, powers, privileges and immunities which are collectively described as the "executive power of the Commonwealth" in s.61 of the Constitution' (p.1).

State Law Cannot Restrict Executive Capacity

In the view of Dawson, Toohey and Gaudron JJ, State law cannot restrict or modify the executive capacities of the Commonwealth (p.20), but a State law of general application can operate to regulate activities which the Commonwealth chooses to undertake, for example, entering into contracts (pp.22-23). According to Dawson, Toohey and Gaudron JJ, the reason why State law is incapable of affecting the executive capacity of the Commonwealth is that, in contrast to the Commonwealth, the States do not have specific legislative powers which might be construed as authorising them to restrict or modify the executive capacities of the Commonwealth: 'the character of the Commonwealth as a body politic, armed with executive capacities by the Constitution, by its very nature places those capacities outside the legislative power of another body politic, namely a State, without specific powers in that respect' (p.20). Their Honours held that, to the extent (if any) that the DHA was exercising the Commonwealth's executive capacity, the NSW Act 'neither alters nor denies that capacity notwithstanding that it regulates its exercise' (p.29).

Accordingly, there was no constitutional objection, on the basis of Commonwealth immunity, to the NSW Act applying to leases entered into by the DHA. Brennan CJ reached the same conclusion and stated that '... there is no reason why the Crown in right of the Commonwealth should not be bound by a State law of general application which governs transactions into which the Crown in right of the Commonwealth may choose to enter. The executive power of the Commonwealth, exercised by its choice to enter the transaction, is not affected merely because the incidents of the transaction are prescribed by a State law' (p.4).

Crown Immunity from Laws of General Application

Dawson, Toohey and Gaudron JJ affirmed that neither the Crown nor its agents enjoy any special immunity from the operation of laws of general application, State or federal (p.24). In their Honours' view, such a notion was not to be found in previous decisions of the Court such as Commonwealth v Cigamatic Pty Ltd (In Liquidation) (1962) 108 CLR 372 and was contrary to the rule of law.

Their Honours specifically rejected the views expressed by Fullagar J in The Commonwealth of Australia v Bogle (1953) 89 CLR 229 that a State was incapable of enacting legislation which is binding upon the Commonwealth (p.26). In this regard, their Honours referred, with apparent approval, to the decision in Pirrie v McFarlane (1925) 36 CLR 170 (p.24). In that case a person acting in the execution of his duties as a member of the Royal Australian Air Force was held to be bound by the provisions of a Victorian Act requiring him to hold a driver's licence when driving a vehicle on a public highway in the course of those duties.

On the other hand, Gummow J appeared to draw a distinction between the Crown and its agents in stating that Pirrie v McFarlane 'may be understood as a case where the State legislation bound, by criminal sanction, individual members of the Defence Force rather than the Executive Government of the Commonwealth' and, on that basis, his Honour held that it was correctly decided (p.61). Brennan CJ expressed a similar view (p.5).

McHugh J rejected the majority's distinction between the executive capacities of the Commonwealth and the exercise of those capacities. His Honour could not see 'any constitutional rationale for a doctrine that would hold, for example, that the States cannot prevent the Commonwealth from entering into a specific class of contract but can alter the legal rights and obligations of the Commonwealth and the subject once they have entered into a contract of that class'; moreover, McHugh J noted that 'the distinction between a capacity of the Commonwealth and its exercise is not easily drawn' and observed that 'it is not a distinction which I find illuminating in this constitutional context' (p.38). Gummow J (p.60) and Kirby J (p.104) agreed with McHugh J that the distinction lacked utility.

McHugh J held that the Commonwealth could not be bound by State law thus supporting the broad view of Commonwealth immunity identified by Fullagar J in Commonwealth v Bogle. However, his Honour found against the DHA on the ground that it was not a body which enjoyed the Commonwealth's constitutional immunity.

Gummow J made several observations in relation to Commonwealth immunity but did not define with any precision the outer limits of that immunity. It was not necessary for Gummow J to do so because, like McHugh J, he held that the DHA did not enjoy the immunity of the Commonwealth. The narrow view which these two Justices took of which bodies constitute the Commonwealth for the purposes of constitutional immunity is potentially significant. (Brennan CJ, Dawson, Toohey and Gaudron JJ assumed, without deciding, that the DHA was entitled to the Commonwealth's immunities. Kirby J, it appears, considered that the DHA did enjoy Commonwealth immunities.)

Kirby J took the narrowest view of Commonwealth immunity, deciding that the Commonwealth's immunity from State law was not significantly greater than the States' immunity from Commonwealth law. He observed that the federal structure of the Constitution prevented a State Act from singling out the Commonwealth for discriminatory treatment or impairing the integrity or autonomy of the Commonwealth (pp.107-8).

Implications for Clients

Commonwealth can be Bound by State Laws

As a result of the decision in Henderson, it is no longer open to the Commonwealth or its agents to assert a broad constitutional immunity from State laws. For some time, the Attorney-General's Department has advised that the High Court was likely to take a more restrictive approach to the question of Commonwealth immunity from State laws than that suggested by Fullagar J in Commonwealth v Bogle.

Certain State laws of general application are capable of binding the Commonwealth. In order to determine whether a particular State law binds the Commonwealth it will still be necessary to determine whether, as a matter of statutory construction, the State law is intended to have that effect. In this regard, it should be noted that in Henderson s.4 of the NSW Act was expressed to bind the Crown 'not only in right of New South Wales but also, so far as the legislative power of Parliament permits, the Crown in all its other capacities'.

In their joint judgment, Dawson, Toohey and Gaudron JJ referred to the presumption that the Crown is not bound by the general words of a statute and that the presumption extends beyond the Crown in right of the enacting legislature to the Crown in right of the polities forming the federation (p.25).

The Test to Apply

In the light of Henderson, the test is whether the State law in question merely seeks to regulate activities or transactions in which the Commonwealth may choose to engage in the exercise of its executive capacities. If it does, and the State law is, as a matter of statutory construction, applicable to the Commonwealth, the State law will bind the Commonwealth, unless it is inconsistent with a Commonwealth law and invalid by reason of s.109 of the Constitution.

The distinction relied upon by Brennan CJ, Dawson, Toohey and Gaudron JJ may be difficult to apply in particular situations, and it will require further decisions of the Court to clarify the circumstances in which the Commonwealth may be subject to State law. (In this regard, it is significant that Dawson J has since left the High Court and that Brennan CJ and Toohey J will be leaving over the next few months. Of the other four Justices, three have indicated that the distinction is unhelpful.)

Distinction Between 'Capacities' and the 'Exercise' of them

The judgments of Brennan CJ, Dawson, Toohey and Gaudron JJ seem to be concerned with activities carried on in common with subjects. The judgments do not indicate clearly whether the Commonwealth can be required by State law to obtain a licence or approval before undertaking an activity. Arguably, the effect of prerequisites such as these would be to prohibit the Commonwealth from undertaking the activity and thus restrict or modify its executive capacity. Arguably, there would be no such effect if, in carrying out the activity, the Commonwealth was required by State law to carry out the activity in a particular way or to a particular standard.

Application of the distinction between the capacities of the Crown and the exercise of these capacities will require consideration on a case by case basis. Until further elucidation by the Court is given, it is appropriate that the Commonwealth proceed on the basis that the Commonwealth is not bound by State legislation which would, in substance, prohibit the exercise of the capacities of the Commonwealth.

Thus the Commonwealth should assert immunity from State laws that would prevent the Commonwealth from erecting a building or using land for a particular purpose. On the other hand, for example, an obligation arising under a State building law on the owner of land to observe safety standards in constructing a building on that land would probably be capable of binding the Commonwealth. Similarly, general State laws imposing safety or pollution controls on the conduct of an activity are probably capable of binding the Commonwealth.

It may be possible to view such laws as merely seeking to regulate activities in which the Commonwealth chooses to engage in the exercise of its executive capacities. On the Dawson, Toohey and Gaudron JJ approach, this certainly seems the case. Such a State law is not, however, concerned with transactions and Brennan CJ may not so readily regard such a type of law as applicable to the Commonwealth.

Necessity for Legislative Precision

The decision in Henderson emphasises the importance of s.109 of the Constitution in ensuring the Commonwealth enjoys a paramount position within its area of legislative competence. In future, if it is intended that the Commonwealth carry out activities or enter into transactions without having to comply with State laws of general application, Commonwealth legislation will be necessary to ensure the Commonwealth is unaffected by such laws. Henderson demonstrates that Commonwealth legislation which merely confers functions and powers on the Commonwealth, its employees or a statutory body may not be sufficient to oust State laws for the purposes of s.109.

The fact that the definition of the 'Commonwealth' may be limited for immunity purposes to the Commonwealth itself and core government agencies, points to the importance, when creating a statutory body, of spelling out precisely the extent to which the body is intended to be immune from State laws.

Application to Territories

The High Court did not consider the question whether the Commonwealth would be bound by a law of a Territory and the position of the self-governing Territories (except the Australian Capital Territory) is unclear. In the case of the ACT, section 27 of the Australian Capital Territory (Self-Government) Act 1988 provides that, except as provided by the regulations, an enactment of the ACT does not bind the Commonwealth.

In the case of the Northern Territory and Norfolk Island, there is no such statutory restriction and the relevant Legislative Assemblies are given the general power to make laws 'for the peace, order and good government of the Territory'. However, on the approach taken by Brennan CJ, Dawson, Toohey and Gaudron JJ in Henderson, it seems likely that a law of the Northern Territory or Norfolk Island which seeks to regulate activities or transactions in which the Commonwealth may choose to engage in the exercise of its executive capacities would be held to be capable of binding the Commonwealth.

Application of State Criminal Laws

Despite the observations of Dawson, Toohey and Gaudron JJ (at p.24) to which reference is made above, it is considered that Henderson does not affect the principle that the Crown itself cannot be criminally liable for an offence except in the most exceptional circumstances. However, this is not to say that a State criminal provision cannot impose obligations on the Commonwealth; simply that the criminal sanctions themselves are unlikely to be applicable.

Further Advice on the Case

Henderson leaves considerable uncertainty. It is suggested that legal advice be sought in relation to areas of concern. The Australian Government Solicitor is well placed to advise whether State laws purport to bind the Commonwealth and if they do, whether or not there is immunity. Any potential difficulties should also be drawn to the attention of the AGS in order to assist in further consideration of the general immunity issue by the Government.

The material in this briefing is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material in this briefing.

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